Imagine a very simple economy of a sawmill and a dairy located at a central location. The sawmill buys logs from timberland owners and the dairy buys whole milk from farmers. Imagine that land is not allocated yet to its best use and can be freely allocated between farmland and timberland. Lets assume some costs, prices and production parameters. The delivered mill price of timber is $60 per cubic metre (price mill is willing to pay for logs). The cost of harvesting is $20 per cubic metre. A logging truck can haul 30 cubic metres of timber per load. The cost of transporting timber is $0.5 per cubic meter of timber per kilometer. Milk has a delivered mill price of $2 per gallon. The cost of milk production is $0.50 per gallon. A milk truck can haul 1000 gallons per trip. The cost of transporting milk is $0.1 per gallon per kilometer. Use the land-rent model answer the following questions. a. Determine the extensive margins for each use b. Determine the competitive margins. c. Draw a diagram showing how land around the city is allocated between these two uses [Assume a circular plane around the city centre]. d. What would happen to the extensive margin of timber if the price of timber increased by 50 percent? e. What would happen to the competitive margin if the price of timber increased by 50 percent? f. In the real world, what other factors might determine the allocation of land among competing uses?